Comprehensive car cover might not be enough

Mumbai-based information technology executive Shreejit Nandkumar recently learnt a comprehensive motor insurance policy might not be enough in case his car was damaged. And, one should have add-on covers or riders to make up for any financial loss in the event of an accident. The 39-year-old argues when a comprehensive plan covers both own damage and third- party, why it isn't sufficient?

“The conventional motor package policy does not cover every eventuality and there are certain aspects which do not get covered under the traditional package," explains Ajay Bimbhet, managing director (MD) of Royal Sundaram Alliance Insurance. Hence, having add-on(s) always helps.

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Nandkumar owns a Hyundai i20 (diesel), which he bought a year before. He largely uses the car within Mumbai city limits and his daily average usage is 70 km. To him, K N Murali, senior vice- president and head (motor) at Bharti AXA General Insurance, advises return-to-invoice and zero depreciation cover, roadside assistance cover, medical expenses/hospital cash/ambulance charges. (RIDING ON A BETTER COVER)

Typically, return-to-invoice and zero depreciation cover can be handy for any owner, as the invoice plan covers the gap between insured value of the car and its invoice value (value of a new car). And, in case of a total loss, the standard insurance policy will pay claim only up to the insured declared value (IDV).

For a brand new car it is not applicable as the IDV is equal to the invoice value. But, each year the value of a car or IDV is calculated after taking into account a depreciation of 10 per cent. So, in Nandkumar's case, he will get a lower value for his car if anything happens. However, an invoice cover can help him claim the price of a new car.

Similarly, depreciation value is deducted from claim amount on spare parts/replaced components following an accident, and is based on the age of the vehicle and type of components replaced. Roadside assistance cover provides immediate assistance in case of a breakdown when you are on the road.

His recommends, apart from depreciation and return-to-invoice plans, buying a loss of key cover with an extra personal accident and accidental hospitalisation cover for himself and other family members who use the car. As the name suggests, loss of key cover pays the cost of replacement of vehicle keys and sometimes even the cost of changing the locks if the car has been broken into.

On the other hand, Jamshedpur resident, K K Mishra is suggested only zero depreciation, return to invoice cover and roadside assistance covers. Considering his age (62), a cover offering complete assistance services such as emergency towing, spot repairs and so on, is recommended. Mishra has a Honda City (petrol), bought in 2010. Had the driver's profile been younger and in a bigger city, more add-ons could be required.

In case of high-end cars, such as BMW-owner Pramod Kumar from Chennai, as the cost of any small repair can be huge, Vijay Kumar, president (motor insurance) at Bajaj Allianz General Insurance recommends an engine protector, no-claim bonus protector, daily allowance and vehicle replacement advantage (total loss can be a major financial hit in case of high-end vehicles) covers.

This is apart from the zero depreciation and return-to-invoice plans.

While an engine protector will cover your car engine against any damage, an NCB protector helps you avail the NCBs even if you have made a claim in the previous year. But, you can do so only once or twice in the policy period.

Yes, you will have to pay extra for the additional covers (see table for more details). The premium is determined by the age of the vehicle, the claims status, region it operates in and the engine's cubic capacity.

Some insurers also consider additional factors like the car owner's occupation, owner's age, monthly mileage of the car (for on road exposure), car usage. These factors cover all perils but the pricing will differ based on the car's exposure to various perils. Like a doctor might use his car sparingly and most of the time it must be parked outside the hospital/clinic. Hence, such cars stand a chance of getting a lower price as compared to a businessman's car which might be used extensively.